Innovation

August 08, 2014

A recent McKinsey article talked about the future of retail with eBay, and part of the future was the demise of mobile as a separate strategy - subheaded "Beyond mobile".

As I read it I thought this is actually true with respect to the whole "digital" thing which has reached the point of Boardroom obsession. I've simply replaced "mobile" with "digital and to me this makes sense:

The latest trend has been that digital is very important. I think we’re already past the digital tipping point, where digital is increasingly not a meaningful concept. It was only a few years ago that there were no tablets and there weren’t any smartphones. Now we’re very quickly moving to a world where we just think there will be technology-enabled screens, connected screens, of all sizes.

Some of them may be in a retail location, some of them will be on your wrist, some of them you may hold. I don’t know what digital means anymore. Nobody has an electricity department in their company; nobody has an Internet department anymore—although they did a few years ago. I suspect that within 24 months, no one will have a digital strategy. They’ll just have an omnichannel, connected-screens strategy.

Does this make sense to you or do you think Digital has longer legs than "mobile"?

November 27, 2013

On the one day I came across two snippets of insights from totally different perspectives that surprised me when I realised that they are connected. And speaking of "connected" that's what they were both about.

In The 5 New Rules That Will Change The Way You Run Your BusinessGreg Satell explains how technology now shapes our enterprises in contrast to just enabling business processes within. His theory is that building and defending assets is no longer a sustainable strategy and will be a liability. An indeed that although we are mostly still learning what Drucker's 1966 prediction of the "knowledge economy" means Satell says that we're already moving from the Knowledge Economy to the Information Economy.

How does that work - information is a subset of knowledge, right? So that feels like we are moving backwards.

Here is Satell's explanation which contains the big insights. They are big because behind them is the unstated expectation that you know about the unprecendented disruptive power of the technologies of cloud, social, mobile & big data (predictive analysis). These technologies provide the connectivity and the capabilty to provide "instant" actionable insights (knowledge) from information, without having to own and invest in the knowledge assets.

Today we moving from a scale economy to a semantic economy, where the knowledge you own is not nearly as important as that which you can access. We’re also in the midst of a new industrial revolution in which an enterprising entrepreneur can leverage manufacturing, finance, marketing and even supercomputing resources from the cloud.

So it is no longer clear that scale advantages outweigh the strategic rigidity that comes with large enterprises. Big firms are learning that they need to network their organizations in order to stay competitive with an onslaught of nimble startups.

Key insights are these:

Access to information (connectivity) more important than ownership of knowledge;

Massive range of capabilities available as a service e.g. IBM's Watson Supercomputer as a Service - incredible! (More on this but Watson as a Ecosystem is one of the most astounding announcements in the history of computing if you ask me, and I started my first full time job as a Programmer in 1967 so I've been watching for a while!)

Categorising and hoarding knowledge in corporate cupboards is a liability.

The new generation seldom make decisions in advance because they make decisions in real-time. And they will make work and job search decisions in same way.

The next generation will have a radically different approach to work, shaped by a childhood of disruptive technologies. ‘Knowing things’ is not important anymore.

Having a network that gives you answers is more important.

Those points jumped off the page to me, as I recalled Satell's predictions. And also, as Greg Savage has said many times - one key characteristics of the recruiters that survive in the future will be that they have access to a very large network of potential talent (only possible through social). Meaning that it is not knowledge of the candidates but knowledge of where to find the candidates, at scale. That's the connection with Satell's observation.

By the way these trends are also connected to the Internet of Things which recently became the new catch-cry of Marc Benioff, and to M2M (machine to machine data) as they speak to the mass of new information. The challenge then becomes how to collect this as needed and turn it into knowledge on the fly. Doing this the "old way" with in-house IT isn't going to fly. It's going to be cloud services - interacting service platforms and ecosystems bought at marginal cost - the in-house edge will be from Predictive Analysis as it is hard to "platform" this as a service as it is still more of an art.

I can see the reality of this, and how it will change how companies are organised and how people will work, and how today's knowledge assets and structures will become liabilities. Now having a "prepared mind" I'm certain to spot elements of this trend on a daily basis from now on. That's exciting.

April 09, 2013

Just 19 words recently attributed to Grant King CEO Origin Energy portend the implosion of electricity network operators. Lost in a large glowing article on the benefits of solar energy those 19 words were simply washed away in the deluge of daily information flow. Learn below why those words were simply one step in ten steps towards the commercial demise of the power grid operators.

It's not the electricity network failing but the commercial failure of the power grid business

Firstly, let's set the scene. I did not say that the grid is headed for failure. It could fail, as the ultimate outcome, but that's not my point here. Firstly the private companies responsible for the electricity transmission and distribution grid structure will face commercial collapse. Then, to prevent subsequent failure of the grid government intervention will be required. We're focused here on the steps leading to the commercial failure of the network operators.

The rise of independent power production by individuals and companies as epitomised by the rapid uptake of domestic solar energy installations has set in train an unstoppable national disaster for the power transmission and distribution network operators, and the nation. As more people go off-gird the networks companies as private entities are doomed. Already Australians pay 130% more for electricity than Canadians, according to new research - a power premium to rise to 250% once the carbon tax and locked-in price increases take effect.

Solar energy spells disaster for power network operators and the disadvantaged

Australia only produces about 1.2% of it's annual power demand from solar, the trend to solar is accelerating due to compelling triumvirate of government incentives, falling equipment prices, and rapidly rising power bills, as noted recently by the Clean Energy Council:

More than two million Australians are now getting cheaper power and saving some half a billion dollars a year on their electricity bills, because of their switch to solar energy.
The number of Australian homes with solar power systems has passed the one million mark, according to figures from the Clean Energy Regulator that confirm the milestone was reached in March.
Clean Energy Council Chief Executive David Green said this meant that approximately 2.5 million Australians now lived in one million homes with a set of solar panels on the roof.

Ironically, the greed of the power companies, through their rorting of the pricing regulatory system, has probably been the most powerful and emotional incentive for people to want to install solar panels. There is $55 billion worth of network upgrade spending already locked in, and it was recently estimated that on a national level, network costs would contribute about 40% to increases in electricity prices from 2011/12 to 2013/14. Even the Australian Consumer and Competition Commission has caught on to the sport of the power companies:

Sims [Rod Sims Chairman of the Australian Competition and Consumer Commission] is only the latest in a succession of independent authorities to identify the huge cost of a flawed regulatory model for electricity pricing that allows power companies to use investment to game the system to gouge consumers. Ross Garnaut was the first prominent figure to call for a fundamental overhaul of electricity regulation when he updated his climate change reports in 2011 and identified market, government ownership of power companies and regulatory flaws as a key reason behind rising power bills.

The companies outwitted the various governments in their privatisation negotiations, fair enough that's what happens 90% of the time. And, they had what they thought was a monopoly, like the privatised airports, tollways and water service providers, so they could gouge to their hearts content right?

Yes, right, they did. When pricing submissions came around they employed special purpose consultants who were expert in every nuance, trick, and rort in the regulations. Big bonuses were paid all around when the rorts came off and the price rises gave a lot more bang for the buck of projected capital investments. They gamed the system with intent.

Yes, the outcomes here would have happened anyway. But they would have been slower, and with far less emotion and rancour had the electricity companies acted ethically, which they did not.

Solar energy spells crisis for power grid, doom for the network operators

What is this impending commercial crisis, and why? It's consequence of these 9 steps, leading to #10 which is the actual market failure of the network operators:

The grid needs to be maintained at (a nominated) peak capacity;

People buying less energy means that the grid cannot be maintained without huge price increases

The people who can least afford it e.g. not on solar, will be hit extremely hard

People who can afford it will go completely off-grid HOWEVER they will want to retain a connection as emergency backup

The effect of #4 will accelerate the affect of #3 on those that cannot go solar or off-grid

Network operators will lobby government to dramatically raise the cost of just "being connected" in order to try to cover maintenance costs, and governments will have no choice but to agree

Solar panel owners will then install more and more on-premise energy storage capacity, which is also falling in price very rapidly

Micro-communities e.g. large blocks of apartments, will realise that they can share capacity and then wire themselves up with enough backup to go off the network entirely

The scope of these self-networked self-wired communities grows which results in greater backup capacity and more and more people completely off-grid, in part driven by the "outrageous" connection cost imposed by the network operators

Inevitably, the network operators fail financially - one by one- and the Government has to ultimately re-claim the networks and run them as a public service, at substantial cost.

Why Governments will have to Reclaim the Electricity Grid as a Public Service

You are probably thinking that this is all fanciful, or even fairyland right? If it were so then many energy "leaders" would be talking about it right? Well if you do some searching you will find some conversations, but you're right in that you'd have to search and with some diligence.

So maybe I'm to be treated in the same way as a climate change skeptic - what do you think? Perhaps I can simply cast into the dark corner of "anti-solar" and all will be fine?

But, wait ! What DID Grant KIng actually say? On page 8 of The Age on the 5th of April 19 words were attributed to him. He issued words of caution in a large positive article on solar energy:

The spread of solar, though, has its critics, such as Grant King, chief executive of the largest retailer, Origin Energy. He said PV owners retain grid access but as they buy less power from it, costs will rise for everybody else.

Now it's extreme to be against solar per se, although Grant King is speaking from a position of self-interest. But never-the-less the BIG point he makes is what we are saying here. And those 19 words, and that warning, went no further. So this is a topic not yet on the public energy or political agenda.

But this issue is not going away, it cannot go away, it cannot be ignored any longer. It will mean massive restructuring of the electricity network operators, and it will mean that governments will either have to own the networks again, or pay huge social subsidies to the operators.

The looming solar tax as a social payment

Where will those subsidies come from?

They will have to come, in the main, from those that operate solar for their own benefit - either identified by definition or demographic or income. The only other option is to raise general taxes which in one way or another will further penalise those than can least afford their electricity.

What will probably come about is a Power Benefits Scheme analogous to medical, where it becomes part of a social safety net.

Does any of this mean that we should stop deploying local solar systems? Not at all, and there is really no way to stop it anyway except by punitive legislation, which would be extremely controversial.

Questions on solar and the power network operators

What do you think - do you see alternatives to this scenario?

Which of my steps is fatally flawed, leading the demise of my prediction?

How does Germany solve this issue when at times 40% of their grid's power is supplied from solar?

How do you think governments should react, or even better how should they plan for this?

This in the Australian Financial Review p10 April 10, 2013 - which is why it is uncontroversial to say that the electicity companies are behaving unethically. They are entitled by the laws of the land to exploit the rules to the full. That does not make it ethical behaviour, which it is not. Here are the key phrases from the article:

March 21, 2013

There are many massive disruptive waves crashing on the shore of business today, perhaps more than at any time in history and certainly moving with more momentum. Think not just cloud computing, social media, big data, predictive analysis, collaborative commerce, mobile platforms, and biological waves but think of where they intersect and overlap - that's massive.

Up until now general computing and global networks e.g. the Internet, have concentrated on digitising all things analogue. Feedback from the real world obviously has existed in parallel in everything from space rockets to oil refineries, and very sophisticated at that.

But the Wave of Analog-to-Digital (A2D) Disruption brings a level of accessibility to a new level for the masses, and at rapidly diminishing cost points, and feeds that information back into the global digital networks.

For example the Google Driverless Car brings analogue back into the Google digital world and along the way has huge social, political and economic consequences. Suddenly roads hold more traffic, far more, because the density, speed and braking distances are optimised. Less fuel is used, the need for most city parking space is eliminated, and potentially fewer cars are needed.

Analog to Digital consequences

The outcomes of that need to be pondered, and by more industries that you think. Investments by superannuation or mutual funds in companies with parking lot real estate assets will fall in value, same for their investments in toll roads owners and operators, taxi fleet owners would suffer as driverless cars were co-opted through collaborative commerce, etc.

Shopping Centres could offer perks and incentives to have cars bring customers, and among a million other scenarios the fact that everything is connected and located means that real time interactions across all facets of daily life could be optimised and bargained for negotiated in near real time.

More digital disruption

If we consider other big disruptive consequences, think of the motor vehicle insurance companies - a massive global business. All of a sudden everything is based on real vehicle data (noticed that I did not say driver data).

That means that companies which are most nimble and agile digitally and with the best algoritms and "big data" can now pick off all the low risk customers and offer them very substantial savings on their premiums. This leaves all the high risk vehicles with the incumbents, notoriously not nimble nor digitally agile.

So these are big industry disruptions, from digitalisation and in particular from the accelerating connection of analog back into the digital empires. And this is only one of the huge disruptive waves coming over the horizon.

Do you have your head above the waves and can see them coming and have considered their impact in your industry?

October 05, 2012

I was surprised today to see relatively little in the tweetstream in Australia about Facebook's achievement in reaching 1 billion users. I had to search to find comments as they weren't streaming through, and then I also discovered that about half the comments were sceptical or negative, which surprised me.

It's a massive achievement, with big implications for business and enterprise IT. Here are 5 - off the top of my head. They are not very well researched - forgive me - but at least I'm putting out thought-starters about the implications of Facebook's achievement.

1. The power of the smartest combination of technology, technologists, business strategy and execution

It demonstrates how dramatically the smart choice of technology and business models can decimate the competition. We know the story but it's worth repeating that Myspace was bought for $580m in 2005 and reached a peak of about 100m unique visits a month in 2008 and at those times Facebook was deemed to be an also-ran. Facebook's architectural platform strategy together with its computer science and computer engineering prowess a la Google and its incredible ability to execute rocketed it past the competition while at the same time running on a relative shoestring.

And furthermore Facebook has made much of its secret sauce public, through contributing to open source projects and the establishment of its own Open Compute project. That's partly because of its mission, and mostly because it knows that the knowledge alone isn't precious, it's the ability to execute.

Which brings me to my next point, how Facebook has revolutionised the economics of computing.

2. Computing Economics

Facebook's total cost of revenue is about $1b. A large chunk of that goes to running IT infrastructure including "data center operational expenses include facility and server depreciation, equipment rent expenses, energy and bandwidth costs, support and maintenance costs and staff salaries, benefits and share-based compensation".

In Australia the big banks, big telcos, and some other large organisations spend in excess of $1b per annum each on IT to serve a minute fraction of the user base of Facebook.

Can we even calculate how small that fraction is? Let me see, let's say 25m/1,000m = 2.5% right? Now even if you throw in all the reasons that "we're different" and double that 2.5% to 5% then we're seeing 20 times less value for money in Enterprise computing than Facebook can achieve day-in and day-out.

We’ve always been small in terms of number of employees. We have this stat that we throw out all the time here: There is on the order of 1,000 engineers and now on the order of a billion users, so each engineer is responsible for a million users, says Zuckerberg.

In fact, Facebook has reinvented the economics of data centres and computing. Which brings me to my next point - reliability.

3. Facebook's reliability across 1b users is astounding

Australia's major banks all have very public problems in keeping their basic ATM & EFTPOS networks running "Angry customers slam Commonwealth Bank meltdown". In response some have committed huge sums - $300m, $400m - to remediating their systems. The end result for the customer is no difference in anything except that the service will stay up as promised. On the other hand Facebook manages to stay up to high levels of availability and runs all this across public infrastructure - not dedicated expensive networks.

Once again, I am sure that there are all sorts of nuances, all sorts of reasons why "we're different" we're more complicated" etc etc but for all intents and purposes Facebook stays up globally for 1 billion customers while very expensive dedicated enterprise systems in a single country serving a minute fraction of users don't stay up.

If these enterprises knew what the Facebook engineers know than they'd be equipped to deliver a lot better value for money. And furthermore Facebook never intentionally goes off the air for system upgrades, which brings me to my next point.

4. Very clever zero-downtime system upgrades

Facebook has developed a remarkable 100% uptime service while at the same time constantly experimenting, innovating, bug-fixing, updating and upgrading their software. This hasn't fallen out of the sky in to their lap. They've invented most of it, building on the experience of some others like Google. Facebook's proven processes of gradual releases and dark launches should be the envy of large-scale enterprise IT. Their A/B testing processes are phenomenal and they now have the amazing ability to A/B test on just 1% of their active user base and gain feedback from 10 million users!

In contrast, to my knowledge all the banks in Australia are still taking their systems off the air at least every week for system upgrades. And remember, these outages are just repairs, not the continuous raft of new features and substantive user service upgrades managed by Facebook with zero downtime.

5. The value of a platform

The essential reason that Facebook crushed MySpace was that Facebook build a platform while MySpace tried to build a closed community system. Facebook's approach is conceptually the same as building a mobile ecosystem of content and apps, as invented and launched by NTT DoCoMo in 1999 and as copied by Apple 7 years later. This is the essence of why cloud computing is so important. Cloud is only trivially about the dial-up of infrastructure and just outsourcing iron. Rather, it's fundamentally about the ability of platforms to interact and mash-up through defined application and data protocols e.g. APIs and the Open Graph.

It's an old story, but a poorly learnt one. In 1999 DoCoMo when set out to make its i-Mode service the most successful internet and app store-enabled mobile system in the world (in which it easily succeeded) it deliberately aimed to make the content providers and app developers as successful as possible. That's why it gave them 90% of the revenue, and why many listed on the Tokyo Stock Exchange and made thousands of millionaire entrepreneurs. Facebook as a platform has spun-off similar success stories.

With a "flick of a switch" Facebook could become the biggest of many things - the biggest virtual currency provider, the biggest bank, the biggest postcard generator, the biggest flowershop, the biggest video streaming company, the biggest news company, the biggest green electricity retailer etc etc.

That's the power of building platforms and not applications. Is it relevant to enterprises? Well I think if Facebook decided to become the world's biggest bank, or just enter a few prime markets as a banker, then we'd have an answer wouldn't we? And then it would be too late.

Summary

Well done Facebook. What a lesson for enterprise IT there is in the taming of complexity, the agility, the reliability, and the power of the platform. It's a combination of technological mastery and business strategy and execution ability and agility which the world of business has not seen before.

And I didn't even touch on Facebook's data mining and personalization and their ability to do data analytics at a huge scale to connect everyone and to build the map of who and what 1 billion people know. WITH FACEBOOK YOU AIN'T SEEN NOTHING YET!!

I'm a fan of Simon Wardley and Randy Bias on this (and throw in some Berard Golden). Cloud computing per se is not really disruptive innovation. That's not to say that it is not innovative. And it is certainly not to say that it is the same old thing we've had for years just rebadged by marketers.

That "old hat" line, used by the best salesmen in the old enterprise software and new private cloud vendor organisations, is simply a ploy. It's a sales ploy to keep the buyer in their comfort zone while they sell them some more "stuff" to keep them away from the real cloud.

Need to get your head into the value not the features

As far as the IT infrastructure goes it's fair to say that it is evolving, or sustaining, innovation and not disruptive innovation. Even though for the major cloud operators and providers e.g. Facebook or Amazon, it has required a lot of innovative pursuits, the result from the consumers' viewpoint is not disruptive innovation.

For instance, let's consider virtualization, because it is often discussed as the core "innovation" of cloud computing. I've picked it for 2 reasons. The first reason is that often becomes the sink hole for discussions on cloud, as the be-all and end-all, and the second reason is that it illustrates the point about evolving innovation.

Discussions about cloud often centre on virtualization. But cloud and virtualization are independent, especially as far as the potential of disruptive innovation is concerned, and I'll come to that later. Google, Facebook, Amazon don't use virtualisation. Why not? It's probably more complex but the reasoning at its simplest is that they can't afford to use it. It would increase their capital and operating costs and cut their margins by doing so - think of a 20% hit to each.

Why then, do so many big IT shops use virtualization. Good question!

Here's the uncommon answers - firstly they have to clean up their mess, and secondly they haven't got the talent not to.

I'll explain:

Cleaning up the mess. When you've built an infrastructure mess which is getting worse, it can become economically attractive to impose layers of inefficiency since those inefficiencies are less costly than continuing to build more mess.

Haven't got the talent. The big cloud providers are magnets for the top talent, and it takes talent to get all this right. The Amazon and the Googles and the Facebooks and the Microsofts have the most challenging cloud workloads on the planet - even the big banks don't rate at this scale. It takes talent to move your core systems into a real cloud environment and especially a super-efficient non-virtualized one a la Facebook.

Virtualization does offer a path forward for those "normal" big IT shops who have a mess to clean up. It's an effective way to get some mess under control and hopefully to get a tighter and more efficient architecture out of the transition going forward out of virtualization. But it is not fundamental to "cloud computing".

Conclusion, if you could do it, you often would be better to not virtualize anything in building your core services into a real cloud environment. At best virtualization is a feature, not a benefit.

The second reason I mentioned virtualization was to illustrate its evolutionary heritage. It's certainly not new.

Most often people reference the late 70's and IBM. But it was in commercial use in the early-70s by Burroughs, and by ICL of the UK. ICL's George 3 operating system allowed for multiple copies of its predecessor, the George 2 OS, to be hosted within it as a migration strategy. All the old programs could be run "as is" under George 2, while the system as a whole ran under George 3. This feature offered many advantages in systems administration, but was ineffecient. I know, because I was a George 2 and a George 3 systems programmer, and I wrote my Masters thesis on Machine Portability in the mid 70s.

So the point is that the myriad of developments needed to deliver cloud as a service are part of a chain of evolutionary innovation. This is of no interest to the business consumers of cloud, as these are simply features of cloud not benefits to the business user.

The key for business is that the delivery chain of cloud has now reached a point where it can enable disruptive innovation for the business.

It's about the business bozo!

That is, the features of cloud have been cleverly developed over a long time - they do represent something new in their combination. But the potential of cloud is in the benefit to business to create new business models, new services, new sources of wealth, and new agility.

Those can be disruptive, at the business and industry level. That's why business should be extremely interested in cloud and very uninterested in how it is delivered.

Does it interest you how telco carriers have evolved and developed the technology to deliver us better internet access? For 99.99999% of us the answer is no. But we are interested in how we can make money from having that asset, and particularly if we can layer on a disruptive business model.

Cloud is a vehicle for disruptive innovation by those higher up the value chain - not on the provider side but in the higher order application on the customer business model side.

In fact it's the biggest disruptive opportunity for business for the last 20 years. That's where the opportunity for real cloud innovation lies. And that's also the reason that those businesses which stick their heads in the sand about cloud may well be placing their business at risk of being attacked by more nimble and cost-effective competitors.

If you are driving your business forward and see innovation as an ingrained strength then you must come to grips, as soon as possible, with how cloud computing can help deliver shareholder value.

Why do so many firms find themselves debating cloud innovation rather than business innovation from cloud?

August 30, 2011

Innovation guru Clayton Christensen writes that "Jobs made Apple great by ignoring profit", and beyond the headline he actually makes the point that a tunnel vision on profits has been the downfall of many previous industry leaders. He thinks that acceptance, and even pursuit of "disruption", is the core of Apple's sustainability as a highly successful business. But I think there's more to it, especially in the case of Apple.

I agree with (almost) everything Christensen says. And the aspect of Apple he describes is evident in their public comments about the cannibalisation of Mac sales by the iPad.

It's Apple's view of the bigger picture which drives them forward, knowing that Mac sales in some segments will be cannibalized, but in other segments new markets for Mac will open up because of the iPhone and iPad.

I never cease to be appalled at the number of senior executives I meet who say something like "our strategy is very simple - it's to make a profit". Christensen's post is a good reference for them to understand why this may not be in their firm's best interest (that's not to say that the individual's interest and the firm's long-term interest are necessarily aligned!).

Of course there are always certain times when a focus on cash-flow and profitability is paramount. But that's a tactic, or perhaps a short-term strategy, and not a sustaining goal.

The iPod wasn't a device with no existing market

I disagree with one single part of Christensens' analysis, and that points to the big part which I think his post is missing - the role of continuous business improvement.

The one part I don't agree with is his comment that the iPod was a device for which "a market did not even exist yet".

That's factually wrong. The iPod used a whole lot of technology from others who were already in the market with these devices. Just as with the app store, commercially launched by DoCoMo in Japan in 1999, and "iTunes" launched by KDDI in Japan in 2000 in response to DoCoMo's app store, Apple took the best of a lot of existing ideas and improved them.

The improvements were often small - but they add up.

And sometimes they are innovative enough to be patentable. In fact Apple's patents tell the story - if they invented everything that people commonly attributed to them then Apple would own the patents - and they don't. There is so much fluff and gushing in the blog-sphere and paid media about Apple's inventiveness around the iPhone, for example, which just isn't true.

Continuous improvement is a key to Apple's success

What they do brilliantly is what Christensen describes, plus their approach to ingrained continuous improvement, as with the iPod and the iPhone (and some might say the iPad - a reinvented "tablet").

Most companies neglect this "ingrained continuous improvement". It's seen as too boring, or too trivial, or tainted by "quality control" or "being too Japanese" or any other reason that suits their desire to do something more spectacular. They go for "creativity" and "innovation departments".

That's why you see many of the most lifeless entities with big investments in Innovation VPs and Departments and creativity training etc - think banks, governments, metro transportation companies. These types of entities have zero continuous improvement and a big bet on "creativity" but are usually sustained, in fact, by some kind of monopolistic or oligopolistic structural position.

In these organisations, the main innovation is "the event". Here's what Cyril Bouquet concludes after a 5 year study of corporate innovation:

Paradoxically, innovation events can even prove damaging if the company does not have a system for acknowledging, assessing, and developing the bright ideas that emerge from them.

Continuous improvement does not exist in a vacuum

If a firm is truly after game-changing innovation, then a different set of rules and pre-conditions apply. But the reality is that 99% of firms can't execute even "incremental innovation" well and that's where the focus, for them, needs to be. There's no doubt that part of Apple, including Steve Jobs, applied game-changing innovation (see below) yet at the same time the bulk of the organisation is focused on continuous improvement.

But wait! There is a twist. That "bulk of the organisation" is not just a hapless bunch of micro-improvers. Well, they could be, but there is a difference in a highly successful organisation - they have a purpose. Not only a purpose but a clarity of purpose, and a consistency of actions.

Where there is strategic clarity and a compelling purpose in an organisation and the entire organization is aligned on achieving something of great social value beyond the tactical, people become incredibly committed to being successful and tend to ignore boundaries and "not invented here" limitations in order to achieve the purpose.

That is part of Apple's secret source in making continuous improvement deliver so much value, and why some say Why Apple Doesn't Need Steve Jobs. Without that secret source continuous improvements are diluted. It's that simple.

It's also true that the secret sauce does need some healthy additives from the leadership team. Not all that bubbles up from below is going to make business sense at the time, nor can it all be funded. The skill is in how the leadership team can provide a "focus", how they guide risk assessment to avoid irrelevant innovation, and how they decide what needs to be discontinued (since companies can't do it all). The HOW of those is critical to sustaining the motivation and momentum.

iPhone more about continuous improvement and little about invention

I think ingrained continuous improvement is mostly overlooked, yet it is far a more powerful and sustaining organisational force than "invention". And Apple is a leader in applying it.

For example the iPhone was mostly a result of continuous improvement. It bought together things which others had done, commercially, and reshaped them nicely into a smooth ecosystem. It was "smoother" than those from which it learnt. It didn't even have any exceptional new goals, compared to the DoCoMo app store or the KDDI music service - but it executed better and in the right market.

For example DoCoMo's i-mode (1999) was totally focused on the end-to-end experience and the user interface and they even tuned their network to ensure the handsets performed to delight the users. And they gave content providers 90% of the revenue because they wanted the content providers and their ecosystem to be as economically successful as possible.

The really remarkable innovations with the iPhone, for example, were that (1) it broke out from under the dead hand of the telcos - that was a revolution (a game-changing business model innovation), and (2) the extent of the media deals (or perhaps that was a continuous innovation from the iPod). The hard yards and the strength of the final whole offer were a product of a relentless focus and ingrained culture of continuous improvement. This spans the whole organisation, not just the Innovation Department.

I believe that much of Apple's success can be attributed to this attitude towards continuous improvement across the entire firm, plus the leadership's lack of fear of cannibalization as Christensen says (combined with their other assets and ability to execute).

Continuous improvement as an ingrained culture is old fashioned and unfashionable but Dr. Deming had it right - as Apple proves.

How important is continuous improvement to Apple's success, compared to say "invention"?

August 24, 2011

It's a dangerous path to think that the iPad is just a PC, as numerous sources quoted Steve Balmer as saying at the 2010 D8 Conference. I'm not sure that he actually said exactly that, but that was the most common byline after his session. Holding on to that interpretation is surely delusional and not in Microsoft's best interests?

I think that Balmer actually said something like everything you can do on an iPad you can do on a PC, and it's just about form factor. And in fact just a couple of days ago one of the senior PR gurus at Microsoft echoed those exact words, so I guess that IS the party line:

They [tablets] are each highly optimized to do a great job on a subset of things any PC can also do. Poor Frank Shaw got well and truly hammered in the blogsphere for his post.

Whereas Steve Jobs had described the PC as being "like trucks", Blamer countered by saying shared devices e.g. a PC in the home are not going away, if only for cost reasons. (You know, Balmer should have said that there are some important things we do on a PC that are just a pain on an iPad - try blogging for example. But in any case his mental model is a liability.)

The mental model matters

So what's the problem in holding on to the mental model that the iPad is just a svelte PC?

For one, the iPad is making massive gains in market share, and creating new markets, and powering Apple to be an extremely serious competitor to Microsoft in some of it's core lines of business. Large corporations are buying large blocks of iPads and Apple cannot keep up with demand. The corporatization of IT is a big deal, and Apple is at the forefront of that wave.

And for another - the market doesn't believe you. Which means you will lose market share, even faster.

It's something different, and Microsoft's challenge is to find out what it is an how different. If they don't start with that attitude then they are likely to never bridge the gap.

By the way I don't actually know what it is. It is all of these things but what else:

a brand

a fashion statement

a geek statement

a business statement

a personal statement

a business tool

an entertainment tool and portal

a great way to interact with your children

a satisfying experience

fun

work

simple

quick

sharp

a personal assistant

part of Apple

not part of Microsoft.

What the "whole product" is, which is driving incredible wealth to Apple's bottom line, I don't quite know. Most obviously the iPad whole product is a LOT MORE than the device - which is what I think most of the other tablet makers don't quite get.

What the other tablets are IS just a piece of junk, a boat anchor - HP proved that! Of course Android will make some headway, and that headway depends on everything other than the tablet itself - the table is just a ticket to the game. But what is the game?

The "ecosystem" is a word, and a powerful one, which explains Apple's success. But it is not all.

If Microsoft have a mental model which is focused on the device a la the PC world, and the concept that they are just remodelling the form factor, then that is surely doomed to failure. Even if they don't quite understand it, as I don't, then they should approach the iPad "whole product" with a mindset that this is something different.

Let''s face it, if you've been dissing your competitor for years, and then failed at everything you've done where they've been beyond successful, then something isn't quite right with how you view what they are doing. (Examples: Zune - total failure; Retail Stores - total failure; Tablets - total failure; Mobile Phones - significant relative failure)

This is a different world and we need to understand it.

To do otherwise is to dance on the head of a pin, while the spoils fall to Apple in bucketloads.

Adjust the mindset - let go

There's no rocket science here. I'm just saying that it takes a "simple" Peter Drucker-ish adjustment to the mindset, and then progress can be made by Microsoft. And good luck to them, sometimes Apple gets on my nerves with their crappy attitudes to customers.

But hey, I'm still "queueing up" for my iPhone 5 !!

So let's see the mental model that the iPad is not just a PC, and see what Microsoft can turn out with it's incredible resources. That would be exciting. Another form-factored PC as a tabletwon't be.

August 16, 2011

"Engagement is actually a pretty complex process when you look under the hood", said Axel Schultze in a recent post at Social Media Academy.

It's a theme which has rung out from many of the more experienced social business consultants during this year. It's the realization that (a) the old advice of "just getting out there and doing something" isn't going to get you to a "social business", and (b) that engaging your own organisation needs a solid plan and actions.

Have your customers take the lead

Axel actually went further, his post called Engaging customers is actually a bad idea - that's provocative. He suggests turning the engagement procedure on it's head and facilitating your customers to first engage with you. Which means - you need to find multiple ways, and customer-preferred ways, for them to engage with you.

In order to do that you first need to know in which social places and spaces your customers and prospects and their influencers are hanging about having conversations. And that's not so simply if you have multiple brands, products, services, and you also want to check out your competitors.

Which means that before you start heading anywhere, you need to known where you are today, and where your customers, prospects and competitors are.

Planning - knowing where you are and where you want to be

Remember the "old" idea of building a solid plan to get from A to B? From the AS IS, to the TO BE, and taking into account risk and resources - I found a 10 year old pic from a PPT of mine which shows the process - on right.

That model still holds. Planning starts with an assessment of where you are in this process and where your customers etc are. As they say at iGo2Group:

A strategy is a plan of how an organisation will move from its current social assessment to its agreed business goals as it relates to the use of social media and networks to get there. Goals are key to great social strategies and they may be for sales (revenue, margin, share) or marketing (leads, programs, pipeline) or market research (monitoring, competitive, sentiment) or service (customer satisfaction, reduce service costs) or innovation (new product development, product testing, launches). But they must be tangible business goals.

So the plan is how to move from the current, to the goals. In fact iGO2 say "the most overused word in social media today is 'engage' " - better to provide benefits to customers and provide paths for them to engage and in a way which takes you towards your goals.

That then raises the question of tactics, and social media strategy and tactics are often confused.

Tactics and strategy often confused in social media discussions

Thinking of tactics as the following kinds of things, this is a complex part of the social reconstruction of an organisations processes e.g. the social penetration deep into company structures to create an engaged work force, and the creation of internal and external social communities, and education and training of employee and partner communities to leverage Social Business, for example.

That's all tough stuff in any moderate sized organisation. It requires solid thought and serious commitment and resource allocation. It's a world apart from having a few people doing what might be "great job" in some isolated unit of the business e.g. the "Twitter support team". And this is why, now, it's not really recommended to follow an "enthusiast" path to social business as that approach can't really do more than educate other early adopters. It falls short of taking the organisation with it.

In a nutshell, being "engagement ready" is a major undertaking which in itself requires serious analysis and planning, aligned with a social media strategy and the plans to channel in engagement from customers.

The bulk of responsibility rests squarely on the users’ lack of vision, and understanding of smart practices around implementation and adaptation, says Steve based on his conversations.

He notes that many times the tools disappear into a corner in Marketing, with a young enthusiast driving it, and that "this is a heartbeat away from saying that your nephew designed your company logo". Exactly.

Steve advocates the type of social media team that is advocated by all the experienced social business practitioners now:

... include a representative from every key department on the team to help implement your social media monitoring program, build a strong mix of skills and points of view, constantly evaluate efforts and results, and set clear goals, you have a fighting chance at making social media monitoring a powerful asset to your organization.

His readers agree - overwhelmingly - I suggest that you read the comments to his post.

What is it, again, that we're trying to do with social media?

Finally, a fundamental confusion needs to be put on the table in order to not have mismatched expectations. It's often the case that one side of a discussion about social media strategy is thinking "customer insights" and "ideas" and "sales", and the other is thinking "brand protection" and PR. They require quite different setups and socialisation, and that's why the initial planning steps and goal setting are so important. If you are satisfied with brand monitoring that's one thing, if you want to concentrate on sales leads that's another, and on innovation another.

For example, as far as innovation goes you'll need to listen out for the most wackiest conversations about your product and services - where people are doing odd things or unhappy in a "promising" way. If you're interested mainly in brand monitoring and PR you'll be listening mainly for "negative sentiment", and for sales you'll want to hear some "immediacy" in the conversation.

Then, your structures and teams and resources and executive actions will need to be tailored and aligned with each of those different objectives - whichever one you choose, or several if the organisation has the bandwidth.

So you get the idea, that to end up in the right place you need to start in the right place and know where you're heading and how to get there. That's where social media is today, and it's good to see the maturing market for proper social business consulting services.

Do you still see a rush to action prior to "thinking" in social media strategy?